How to Dissolve a UK Company: All You Need to Know About Company Dissolution

Ryan Patrick

• 6 min read
How to Dissolve a UK Company: All You Need to Know About Company Dissolution

Company dissolution is a term used to describe the closing down of a company and removing its name from the company's register. It is the official and legal dismissal of a company. If a company is dissolved, it simply means it ceases to exist.

It is essential to some companies due to some reasons attached and you will want to find out in this article. In this article, we will explain Company dissolution, why companies are being resolved, and how to resolve a company.

What is Company dissolution?

This is the official process of closing down a company or striking off all the dealings of a company.

A company dissolution may be voluntary (done by the company and its director(s) or involuntary done by the Companies House due to violation of certain rules.

What is Voluntary Company dissolution?

Voluntary company dissolution is used to describe when the company applies for the dissolution process itself and willingly goes through the process.

This might be a result of failure to function, bankruptcy, death of the owner, or any other reason that will hinder the further progress of the company.

Some of the reasons why a company can be dissolved voluntarily include

  • The operations of the company never started after creation so the company is no longer required.
  • The business was progressing but later went down the drain and is no longer able to function.
  • The company wants to change its legal structure (for example, the company wants to change from a limited company to a partnership)
  • The founder or owner of the company wants to try out another business opportunity and wants to forfeit the company.
  • The owner of the company dies and no one is willing to take ownership of the company.
  • Annual payment fillings had been missed, and in other to avoid late payment, the company wants to dissolve.
  • The company was created to protect the integrity of another company and is no longer needed.

What is Involuntary Company Dissolution?

Involuntary company dissolution is mostly done by the Companies House when the functioning and growth of a company is retarded, the Companies House closes it down.

The Companies House is like a body of all companies in the UK, that have the list of all registered companies and are bestowed with the right to close down any non-functional company.

Some of the reasons the company house will close down a company include

  • The company does not have a functional board of directors
  • If taxes are left unpaid
  • If annual accounts are not submitted
  • If the company has failed to function.

Although the company's house can dissolve a company, they go through a process and perform a thorough investigation about the company before they go ahead to dissolve it.

What You Need To Do Before Dissolving a Company

Before going ahead to dissolve a company, you have to follow some processes and consider some things.

There are some conditions necessary for eligibility for voluntary company dissolution as stated in section 1004 and section 1005 of the Companies Act of 2006. These conditions include

  • The company has not changed its name during the last three months.
  • Is not facing any form of liquidation.
  • In the last three months, has not sold off any of its stocks.
  • Has not carried out any business activities in the last three months.
  • Has an existing agreement with creditors.

What To Do Before Going To Dissolve Your Company

Before dissolving your company, you need to take a few steps first. After checking if the company meets all the dissolution criteria, you can then go ahead to do the following.

  • Discuss with shareholders for any objections.
  • Pay all outstanding wages to employees.
  • Pay all outstanding taxes.
  • Pay all outstanding debts or reach an agreement with creditors.
  • Distribute business assets to all shareholders.
  • Contacting HRMC to close down all the company's payroll.
  • Withdraw all funds in the company's account.

NOTE: creditors can apply for dissolution of the company if no agreement has been made or the terms were not fulfilled. It is therefore necessary to reach a proper agreement with creditors, shareholders, directors, and even employees of the company for proper conversation on how to go about with the company's dissolution.

How To Dissolve a Company

Dissolving a company takes a few steps too.

First of all, a board meeting is held for a formal vote on the decision to dissolve the company. If it is approved by the board, the dissolution can proceed but once disapproved by the board of directors, the company owner or CEO will have to wait and hold another meeting.

Once the dissolution is approved by the board of directors, a company dissolution application can be sent to the Companies House using the DSO1 form.

The DSO1 form is a dissolution form sent by companies to the Companies House with all the necessary information to apply for a dissolution.

The DSO1 form includes all the following details:

  • Full name of the company
  • Company's registration number
  • Signature and name of the director (if there are two, then two signatures but if more than three, then the majority of the signature should be included)
  • Date of signatures
  • Name and details of contact of the person filling the dissolution

The form is available on the Companies House WebFilling (online application) and also available on post. The WebFilling costs £8 while the postal form costs £10.

What Happens After The DSO1 Form is Filled

After the Companies House receives the dissolution form from the company, they

They get the dissolution information and register them. The information is then published in the public register of companies.

The Companies House proceeds to send a letter of acknowledgement to the address written on the form.

They send a message to the registered address of the company to confirm if the application was from the company or was a fraudulent activity.

They go ahead to publish the proposed dissolution information in the Gazette and this is to give room for any objections.

If no objections are made concerning the dissolution, the company will be dissolved within the next two to three months from the day of application.

However, if an objection is made, the company will have to go back and make a formal agreement with the other party and reach a final decision on dissolving the company.

After dissolution, the Companies House will publish the details of the dissolution in the Gazette.

The Companies House is usually in possession of the dissolved company's details for the next 20 years of dissolution.

What is A Gazette?

A Gazette is an official document of record in the UK. They include three publications that announce statutory notices like company strike-off and restoration notices relevant to any of the three UK jurisdictions.

The three publications of the Gazette include

  • The London Gazette: this Gazette is used for publications for companies registered under England & Sales jurisdiction.
  • The Belfast Gazette: for publication of notice of companies registered under the Northern Ireland jurisdiction
  • The Edinburgh Gazette: used for publication of notice of companies registered under the Scotland jurisdiction.

Liquidation and Dissolution

Although sometimes people use them interchangeably, liquidating a company is different from dissolving a company.

What is Liquidation?

In dissolution, it is the shutting off a company in the absence of any form of debt present or in a situation where the debt can be sorted out within the next 24 hours.

However, liquidation is quite different. This the the shutting down of a company in the presence of debt.

In this case, all the company's assets will be sold off and the money used to pay up all creditors available.

Before liquidation, all creditors are mandated to provide proof of debt to the company before any payment will be made.

If the assets are sold and the debts are covered with extra money remaining, it will be shared among the shareholders.

If the debts cannot be covered by the money obtained from the sales of the assets, then the company cannot be dissolved.

The liquidation process can only be performed under the watch of a licensed insolvency practitioner (liquidator) who will regulate the whole liquidation process.

The Members Voluntary Liquidation (MLV) is the term used to describe liquidation that can be carried out within the next 12 months if dissolution.

Before carrying out liquidation, the following are the necessities

  • A licensed liquidator
  • Proof of debt from all creditors
  • An agreement between shareholders

Dormant

Although dissolution is necessary when the company no longer functions and to avoid the accumulation of taxes, there is also another method.

Resolving a company after dissolution is not complicated but the cost that comes along with it is expensive.

So here is a better option; Registering your company as dormant.

If you know you'll revive the functionality of your company in the future and just need time off to sort out other things, registering your company as dormant is the best option for you.

This will hold all the taxes and make your company easily accessible if you want to revive it shortly.

Need Help with forming or dissolving your company?

Incorpuk lives and breathes to help businesses in the UK and outside the UK with all their company formation needs. If you need help or advice on forming or dissolving a company in the UK, kindly contact Incorpuk today.

Conclusion

Dissolving your company in the case of no function is not a complicated process.

  • Make sure your company follows all the criteria for company dissolution
  • Fill out the DSO1 form
  • Then wait for the Companies House to get back to you
  • Upon no further complaints, your company will be dissolved within the next 2 to 4 months.